Alibaba (NYSE: BABA) stock price plunged sharply following reports of increasing trade war tension with China. Reports are indicating that Trump administration is planning to limit their investments in China.
The investor’s sentiments were further impacted by the news of delisting Chinese companies from U.S. stock exchanges. Alibaba stock price plunged to $165 from $180 following the news.
Talks regarding limiting U.S. investments in China and de-listing of Chinese stocks from U.S. stock exchanges are in the early stages. No verdict has been made but market pundits expect a substantial decline in stock markets if the U.S. takes this decision.
The potential U.S. clampdown on capital flows in China would create additional pressure on both economies. This would cause disruption of the hundreds of billions of dollars of investments in equity markets and pension funds.
This situation could negatively impact the Chinese economy. For instance, the MSCI index has added hundreds of Chinese businesses since last year.
This situation has provoked Florida Republican Senator Marco Rubio and a few others. They are suggesting greater scrutiny and stronger investment restraints for Chinese companies in stock indexes.
The senator Rubio is applauding the White House’s work. Rubio said, “This administration deserves credit for their efforts to deal with the threat. The Chinese government and Communist Party are posing an economic and national security threat to the U.S. The threat includes how Beijing takes advantage of its access to U.S. capital markets for predatory purposes.”
Alibaba stock price could experience significant headwinds amid increasing trade war tensions between the two largest economies.
The company, on the other hand, plans to serve 1B annual active consumers and expects to generate $1.4T in annual gross merchandise volume in the following five years.
Last year, its annual active consumers stood around 730M in China. The total annual active consumers were standing around 130M. Market pundits are suggesting investors keep a close eye on the trade dispute before initiating any position.